25. FINANCIAL INSTRUMENTS - OFFSETTING The following table provides a summary of financial assets and liabilities which are subject to enforceable master netting agreements and similar arrangements, as well as financial collateral received and pledged to mitigate credit exposures related to these financial instruments. The agreements do not meet the netting criteria required by IAS 32 Financial Instruments: Presentation as the right to offset is only enforceable in the event of default or occurrence of other predetermined events.
Amounts not Offset on the Consolidated Balance Sheet
Gross Amounts Reported on the
Impact of Master Netting Agreements
Securities Received as Collateral (1)(2)
Consolidated Balance Sheet
Cash Collateral (1)
As at October 31, 2023
Net Amount
Financial Assets Derivatives
$
109,290
$
98,179
$
8,170
$
-
$
2,941
Financial Liabilities Derivatives
$
198,596
$
98,179
$
99,423
$
-
$
994
Amounts not Offset on the Consolidated Balance Sheet
Gross Amounts Reported on the
Impact of Master Netting Agreements
Securities Received as Collateral (1)(2)
Consolidated Balance Sheet
Cash Collateral (1)
As at October 31, 2022
Net Amount
Financial Assets Derivatives
$
110,521
$
82,923
$
21,309
$
6,289
$
-
Financial Liabilities Derivatives
$
156,081
$
82,923
$
71,822
$
-
$
1,336
(1) Financial collateral is reflected at fair value. The amount of financial instruments and cash collateral disclosed is limited to the net balance sheet exposure, and any over-collateralization is excluded from the table. (2) Collateral received in the form of securities is not recognized on the consolidated balance sheets.
26. RISK MANAGEMENT
As part of our risk management practices, the risks that are significant to the business are identified, monitored and controlled. The nature of these risks and how they are managed is provided in the Risk Management section of the MD&A.
As permitted by the IASB, certain aspects of the risk management disclosure related to risks inherent with financial instruments is included in the MD&A. The relevant MD&A sections are identified by shading within boxes and the content forms an integral part of these audited consolidated financial statements.
Information on specific measures of risk, including the allowance for credit losses, derivative financial instruments, interest rate sensitivity, fair value of financial instruments and liability for unpaid claims are included elsewhere in these notes to the consolidated financial statements.
A) MANAGING INTEREST RATE BENCHMARK REFORM AND ASSOCIATED RISKS
Various interest rates and other indices that are deemed to be benchmarks, including the London Interbank Offered Rate (LIBOR) and the Canadian Dollar Offered Rate (CDOR), have been the subject of international regulatory guidance and proposals for reform (referred to as IBOR reform). Regulators in various jurisdictions have advocated for the transition from Interbank Offered Rates (IBORs) to alternative benchmark rates, based upon risk-free rates informed by actual market transactions. As previously announced by various regulators, on June 30, 2023, the publication of USD LIBOR was discontinued. The alternative reference rate for USD LIBOR is the Secured Overnight Financing Rate (SOFR). In December 2021, the Canadian Alternative Reference Rate working group (CARR) recommended to CDOR ’s administrat or, Refinitiv Benchmark Services (UK) Limited (Refinitiv), that Refinitiv should cease calculation and publication of CDOR. On May 16, 2022, the CDOR administrator announced the cessation of CDOR by June 28, 2024 with a two-stage plan for the adoption of Canadian Overnight Repo Rate Average (CORRA) as the replacement benchmark rate. In the first stage, all new derivative contracts and securities would transition to alternative rates by June 30, 2023, with no new CDOR exposure being booked after that date, with limited permitted exceptions. In the second stage, all other financial instruments must be transitioned to alternative benchmark rates by June 28, 2024. In July 2023, CARR announced that no new CDOR or bankers’ acceptance (BA) loans are to be originated after November 1, 2023 , and OSFI supported this ‘no new CDOR or BA’ milestone in October 2023 . On September 5, 2023, one-month and two-month Term CORRA were launched. In response to interest rate benchmark reform, the IASB issued two phases of amendments to accounting standards. On November 1, 2020, we adopted Phase 1 amendments to hedge accounting requirements in IFRS 9 Financial Instruments (IFRS 9), IAS 39 Financial Instruments: Recognition and Measurement (IAS 39), IFRS 7 Financial Instruments: Disclosures (IFRS 7) and IFRS 16 Leases (IFRS 16). These amendments apply until IBOR-based cash flows transition to new risk-free rates or when the applicable hedging relationships are discontinued. On November 1, 2021, we adopted Phase 2 amendments to the same standards noted above, which focus on accounting and disclosure matters that will arise once an existing benchmark is replaced with an alternative benchmark rate. Phase 2 amendments provide practical expedients if contract modifications result directly from IBOR reform and occur on an economic equivalent basis. In these cases, changes to the interest rate of the financial assets or liabilities that are required by IBOR reform may be accounted for by updating the effective interest rate prospectively, to reflect the change in the interest rate benchmark rather than being recognized as an immediate gain or loss. Any other changes to the basis for determining contractual cash flows are determined in accordance with our existing accounting policies for loan modifications as described in Note 2 of these audited consolidated financial statements. Phase 2 amendments also allow for a temporary relief from hedge accounting requirements under IAS 39. Changes in existing hedge relationships that are a direct result of IBOR reform may be reflected in the hedge documentation without the need
104 | CWB Financial Group 2023 Annual Report
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